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Saf T Lok Inc., the troubled company that makes trigger locks for handguns, as well as its recently dismissed West Palm Beach, Fla., accounting firm, have been accused in a shareholder lawsuit of artificially inflating the company’s stock price. Among those named as individual defendants are Saf T Lok’s founder Franklin W. Brooks and its chief executive, James E. Winner Jr., inventor of The Club, the popular anti-theft device for cars. Defendant Goldberg Wagner & Jacobs, which audited Saf T Lok’s books since 1997, was fired by Saf T Lok’s board of directors in mid-February. Saf T Lok was based in Palm Beach County, Fla., until Winner, owner of the Winner Holdings group, took it over last year and moved the headquarters to Sharon, Pa. The 49-page suit filed late last month in U.S. District Court in West Palm Beach seeks class action status on behalf of everyone who bought Saf T Lok stock between April 14, 2000, and April 16, 2001. During that time, Saf T Lok’s stock plummeted from about $25 a share to $1.50. On Thursday, its shares were trading for about 25 cents a share. The suit was filed by Palm Beach, Fla., investor Edward Cohen, who is represented by Kenneth J. Vianale, the managing partner in the Boca Raton, Fla., office of Milberg Weiss Bershad Hynes & Lerach. “Many of the shareholders who bought this company have been severely damaged,” said Vianale. Saf T Lok general counsel and director John F. Hornbostel Jr., who is also a named defendant, said the allegations aren’t true. “We obviously feel, all of us individuals and the company, that the lawsuit is without merit. We feel that we’ve done absolutely nothing wrong, and we intend to defend ourselves vigorously,” said Hornbostel. The complaint alleges violations of the Securities Exchange Act of 1934 for a series of “material misrepresentations to the market” and to the government. In particular, the suit alleges that in April 2000 the defendants told investors the company had terminated its exclusive consumer market distribution agreement with United Safety Action Inc. and that it would market its products directly to retail customers. What the defendants neglected to mention, the complaint says, was that the company’s marketing opportunity was limited because a catalog retailer had already obtained Saf T Lok’s patented products at a discount and was selling at very low prices. Likewise, says the complaint, the company’s financial statements overstated Saf T Lok’s earnings, assets and shareholder equity by at least $3.2 million. “When this information was finally disclosed on April 16, 2001, the last day of the class period, the stock prices of Saf T Lok fell to under 30 cents per share,” says a press release authored by Milberg Weiss. In December 2000, Saf T Lok founder Brooks, who remains on the company’s board of directors today, and another company executive each were fined $55,000 by the Securities and Exchange Commission for lying to investors in 1997 and 1998 about sales and deals that weren’t bona fide. The suit also contends the Goldberg accounting firm helped conceal the alleged fraud by turning “a blind eye” to Saf T Lok’s 1999 and 2000 financial statements. The firm was motivated by the “lucrative work” it was getting from Saf T Lok to audit its books, the complaint says. An alleged example involves the Goldberg firm’s audit of Saf T Lok’s 1999 financial statements. The firm told investors those statements were presented fairly “in conformity with generally accepted accounting principles.” In fact, says the complaint, Saf T Lok’s inventory was represented to be $2.3 million when it was actually “no more than $300,000.” “The staggering magnitude of the unrecognized charges to earnings supports the inference that the Goldberg firm’s audit was so deficient that it amounted to no audit at all,” says the complaint. A message left with the accounting firm’s lead partner, Harvey Goldberg, was not returned before deadline. Saf T Lok management last week notified the SEC that it was unable to file its annual report on time. The report was due March 31.

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